Essays in applied microeconomics

Other Contributors:Massachusetts Institute of Technology. Dept. of Economics.

Advisor:Amy Finkelstein and David Autor.

Department:Massachusetts Institute of Technology. Dept. of Economics.

Publisher:Massachusetts Institute of Technology

Date Issued:2012

Abstract:

This dissertation consists of three chapters on topics in applied microeconomics. In the first chapter. I investigate whether voters are more likely to support additional spending on local public services when they perceive current service quality to be high. My empirical strategy exploits discontinuities in the Texas school ratings formula that create quasi-random variation in perceptions about school quality. I find that receiving an "exemplary" versus a "recognized" rating increases support for a school district's bond measures by about 10 percentage points. Voters respond to the level of a district's rating. not just to whether the district has improved or slipped. I develop and implement a test for whether these patterns of voter behavior lead to efficient outcomes; however, the results are inconclusive. The second chapter. written jointly with Liran Einav, Amy Finkelstein, and Mark Cullen. investigates whether individuals exhibit forward looking behavior in their response to the nonlinear pricing common in health insurance contracts. Our empirical strategy exploits the fact that employees who join an employer-provided health insurance plan later in the calendar year face the same initial price of medical care but a higher expected end-of-year price than employees who join the same plan earlier in the year. Our results reject the null of completely myopic behavior; medical utilization appears to respond to the future price, with a statistically significant elasticity of medical utilization with respect to the future price of -0.4 to -0.6. To try to quantify the extent of forward looking behavior., we develop a stylized dynamic model of individual behavior and calibrate it using our estimated behavioral response and additional data from the RAND Health Insurance Experiment. Our calibration suggests that the elasticity estimate may be substantially smaller than the one implied by fully forward-looking behavior, yet it is sufficiently high to have an economically significant effect on the response of annual medical utilization to a non-linear health insurance contract. Overall. our results point to the empirical importance of accounting for dynamic incentives in analyses of the impact of health insurance on medical utilization. In the third chapter. I exploit a discontinuity in federal financial aid rules at age 24 to estimate the effect of financial aid on college enrollment. school choice. and persistence and degree completion rates. Undergraduate students who are not married and do not have children are classified as "dependent" or "independent" for purposes of federal financial aid based on whether they have turned 24 as of January 1 of the "award year." Independent students qualify for additional grant aid and are eligible to take out much larger federal loans. Using data from the National Postsecondary Student Aid Study and the Beginning Postsecondary Students Longitudinal Study. I show that average grant aid per student increases by about $1.100. or 55%. at age 24. while 12% of students take advantage of the higher federal loan limits. Estimates of the effects of additional aid on enrollment, persistence. and degree completion are inconclusive; while not statistically significant. they do not allow me to rule out sizable effects. I do find evidence of an increase in enrollment at for-profit colleges. concentrated among students whose parents are not college graduates.

Description:

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2012.; Cataloged from PDF version of thesis.; Includes bibliographical references.